88MPH | Capital is a coward
So I have been in South Africa for the last week. From my keynote at Discop last week to a nice little feature on CNBC Africa, on this trip I have been in JoBurg, Durban and now in sunny Cape Town. Yesterday I had a bit of a down day so decided to go andvisit the good people at startup incubator 88MPH. The picture above is of their Nairobi office so I didn’t get the chance to see it real time.
Nonetheless it was an interesting visit, unfortunately the person I originaly communicated with wasn’t around but Dan Bowyer made me feel welcome enough. We discussed all things startup related in Africa. How the differing hubs are positioning themselves, what type of companies are being funded etc etc. During this conversation I finally realised how aggressive Spark had been in terms of funding companies. There are very few incubators who are happy to fund companies more than $100,000 in the the first year. We have 5 startups who have gone beyond that. There were other distinct examples and differences between how our incubators operate. I think there is an important role for funds like 88MPH in any startup ecosystem. Their initial investment is $25k. We are getting to the stage where anything less than $100,000 first in would be very useful to us. We simply don’t have the capacity.
* 88MPH fund ideas. Spark funds founded companies.
* 88MPH leads with technology and product-centric founding teams. Spark primarily leads with market and business development founding teams.
* 88MPH are small <5 product teams. The contrast with Spark companies who employ a lot of people to execute. ToLet have 42 employees, Hotels ~30 and Bus ~22.
* 88MPH fund up to $100,000 then stops or spins out, Spark has funded up to $300,000 per startup to date, but will probably be happy to fund >$1Mn over 2014/15
* Because of their pan-African nature they look at broader markets. Spark focuses on Nigeria. Sequentially. Lagos first. Most of our startups should be able to break even from their Lagos operations
* Spark have very firm and aggressive break-even targets. With $200–300k invested we expect our companies to break even with 18 months from first money in. A couple are within 30% of reaching that number and should definitely do so by Q1 2014.
Capital is a coward. It doesn’t need too many excuses NOT to invest. African capital is a wizard. It is literally invisible. I have a healthy respect for anyone actually deploying startup capital in Nigeria today. Dan asked me if we were competitors. Today the market and capital are our problems, not each other. It’s not zero sum. I can’t fund all the startups. No capital for that. I am feeling positive today but only time* will tell whether we are frontier pioneers or fools.
*Time and some significant ROI on the 88MPH or Spark companies.